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European Commission

[Check Against Delivery]

José Manuel Durão Barroso

President of the European Commission

Report on the European Semester for Economic Policy Coordination: Annual Growth Survey 2014

European Parliament Plenary Session

Strasbourg, 25 February 2014

Mr President,

Minister Kourkoulas, on behalf of the Greek Presidency,

Honourable Members,

First of all, and since this is the first time that I have the opportunity to speak to this Parliament after the dramatic developments in Ukraine, allow me to say a few words about the situation in that European country; a country we feel so close to us now.

We were all shocked by the images of dead people and violence in Kiev. Our number one priority was to stop the bloodshed and create the conditions for a political process that can deliver what the Ukrainian people most wish for: democracy, respect for fundamental freedoms and a better prospect for the country's future.

A lasting solution for the political and institutional crisis can only be achieved through an inclusive transitional government that respects different political and regional sensitivities, and through constitutional reform and democratic elections as foreseen by the agreement of 21st February. Ukraine's unity and territorial integrity need to be respected. The High Representative is currently in Kiev speaking to all political forces, Rada representatives and civil society to assist in this process.

We also remain committed to supporting Ukraine's path towards political and economic reforms. We are already working together with the international community and international financial institutions to find ways to support the country. I launch from here an appeal to all our international partners, in particular Russia, to work constructively with us to guarantee a united Ukraine that can be a factor for stability in the European continent; a Ukraine that will have good relations both with its western as with its eastern partners.

The winds of change are knocking again at Ukraine's doors; the will of the people must prevail.

Honourable Members,

Let me now turn to the topic of today's discussions, the European Semester.

First of all, I would like to recognise the hard work of the three rapporteurs, Mr Philippe de Backer, Mr Sergio Gutierrez Prieto and Mr Sergio Gaetano Cofferati, as well as the Economic and Monetary Affairs, Employment and Social Affairs and Internal Market and Consumer Protection Committees. This allows us to have this timely debate today. And I would also like to thank the Greek Presidency for their commitment and the comments just made by the Minister for European Affairs.

The European Semester goes to the very heart of what has preoccupied us all, especially from the outset of the financial crisis – our economy. How can we make our economy recover again, how can we in fact work together for employment in Europe? These are the issues that our citizens expect us to address - jobs and growth.

A year ago, some were still talking of the collapse of the Euro; some were even speculating about the disintegration of the European Union.

I think we can say, together, we have proved the prophets of doom were wrong.

This is the year in which we are moving away from recession. The recovery is expected to continue and to become more robust during the year and strengthen further in 2015. Consumer investment and confidence is positive. Industrial investment seems to be picking up. Instead of expressing concern, leaders outside Europe congratulate us for our resilience and for our political willingness to act; and also congratulate us for the necessary, courageous, and often painful reforms that several Member States have put in place.

Naturally, we know the situation is still difficult. Tackling unemployment and social consequences of the crisis will take time and resolve. But the situation is improving. In a few hours, Vice-President Rehn will present to the press our latest economic forecasts, and they will confirm that we are on the path of recovery.

We are coming from far. The comprehensive response we have given to the crisis is bearing fruit.

We moved from the pooled bilateral loans to Greece in 2010, a situation of real emergency, which was the only possibility available at the time, to the European Stability Mechanism in 2013, which has today a capital of 700 billion euros. Frankly, some time ago it would have been unthinkable to admit that Member States could agree to create such a facility.

We were able to provide financial assistance to Member States in distress, or – in some cases – specifically to their banking sector. Were it not for European solidarity, the economies of Greece, Ireland, Portugal and Cyprus would have collapsed, with the huge social consequences that such a collapse would have had.

We also significantly reformed our financial sector, from new capital requirements to, more recently, the proposal on the structural reform of banks.

We are about to conclude – and I certainly expect the strong support of the European Parliament for this - the Banking Union which is a significant step in the deepening of EMU.

And finally, we have overhauled the system of economic governance in the European Union, particularly in the Euro area. This has been done through legislation, co-decided with this Parliament, giving us a strong foundation for taking both preventive, and if necessary, corrective action in the future. Not only was budgetary surveillance strengthened, but the system was widened to cover macroeconomic imbalances.

I think we can say this was a strong set of achievements, which were possible due to the strong involvement of this House.

While some of us would have liked to go further and faster, I believe it is fair to recognise progress in this area.

The crisis has given us the political will to make the necessary changes that were politically unattainable and simply unimaginable five years ago!

And in the most recent years, all this has been done in a coherent European framework which is provided precisely by the European Semester.

Throughout the crisis, the Europe 2020 strategy has served as our compass, and the European Semester as our main delivery tool. By introducing the European Semester, we have ensured that coordination of Member State economic policies takes place at the European level, whilst respecting, of course, the national competences. In difficult economic and political times, this has allowed for the transparency, for effective dialogue and monitoring.

The Commission has also proposed to develop the social dimension as an integral part of EU economic governance. A reinforced surveillance of employment and social developments is now a reality as part and parcel of the European Semester.

And rightly so. Because we know how difficult the situation remains in many Member States, especially with unemployment and youth unemployment so high.

It is true: improvements in macroeconomic conditions are not yet felt by citizens themselves and their families in some of our Member States. But at the same time, it would be politically inaccurate and intellectually dishonest to deny the progress we have made.

We have, in short, started down the path of a Deep and Genuine Economic and Monetary Union, to fix the structural faults that lay hidden during the good times, and put in place now a more sustainable model. These renewed foundations were laid down in just a few years, and they play a key role in helping Europe emerge from the crisis more resilient for the future, and stronger.

Honourable Members,

In all of this, despite many of the debates, we have seen more, not less Europe. In fact, we have seen the European integration make progress, namely in the euro area, with calendars of economic and fiscal reporting and evaluation now synchronised; draft national budgets now seen at a European level; and a stronger role for the European institutions, including the Commission.

And this was possible also thanks to many of you, in the European Parliament.

Honourable Members,

You have played a vital role in the European Semester from the start. You insisted – and rightly so - on making legislative the so-called six-pack and two-pack, despite initial strong reservations by some Governments; and you defended, on several key occasions, the Community Method.

Your role has thus gone much beyond improving the governance structures. Along with national parliaments, you have brought democratic legitimacy, accountability and ownership. As we said last year in the Blueprint for a Deep and Genuine Economic and Monetary Union, economic governance, social commitments and democratic legitimacy must move forward hand in hand.

Tighter economic governance needs tighter democratic control. That is why I was delighted to take part in January in the European Semester Week that brought together Members of this Parliament with 140 national parliamentarians. And many of my colleagues in the Commission, including both Vice President Olli Rehn, responsible for Economic and Monetary Affairs, and Commissioner László Andor, responsible for employment, social affairs and inclusion, who are with me here today, actively participated in the economic dialogues you have decided to organise.

Honourable Members,

The European Semester has not simply been about putting new processes in place. I have to insist on process because in fact it was an emulation and it is important now to make sure that it will be consolidated for the future. But what is more important than the process is that it has led to concrete and significant fiscal and structural reforms that have helped restore confidence. It has added a strong economic dimension to a range of policies – from taxation, energy, transport, research, climate and environment to judicial system. And this is very important politically because, as I have said already to you, during the most acute moment of the crisis, the big questions that markets and our partners put to us was not so much about the deficit of debt countries or the other countries, but about our political will to work together, namely in the euro area. By putting in place a system of increased coordination, I think Europe has shown that there was a will and there is a will, in fact, to learn the lessons from the crisis and to avoid same old mistakes of the past.

I think we can say that the need for sound public finances is now entrenched. It was not like that some years ago. Some governments believed they could go on and go on, spending the money that simply was not in their treasuries. Deficits have been halved. Significant structural reforms for more competitiveness are underway. Reforms such as the modernisation of our labour markets and public administrations; or the youth guarantees that are being put on place to ensure that all young people under 25 years old receive a good quality offer of employment, continued education, an apprenticeship or a traineeship within four months of leaving formal education or becoming unemployed. This is a matter which I believe deserves support, strong support and a sense of urgency, and Governments should now implement the programmes on the ground.

Honourable Members,

I very much welcome many of the recommendations in the reports being debated today.

We should continue to look at ways to be more competitive, by making further progress on the single market and adopting the remaining proposals under Single Market Act I and II, in telecoms, transport, energy, the digital sector; by getting rid of the blockages in business and professional services, retail and construction; by cutting red tape and reducing regulatory burdens; and by improving access to finance for our SMEs.

Tax systems should be simplified further and the tax burden redirected away from labour; we should be more resource and energy efficient and invest more in research, innovation and development.

Because we cannot afford to sit back and relax. Not only do we remain exposed to external risks; we still have a long way to go in our own reforms and in deepening the economic and monetary union. We cannot honestly say we exit the crisis whilst unemployment remains so unacceptably high, especially amongst our younger generation.

We have a responsibility to deliver.

That is why I want to see the European Union Budget used to its full potential. We must now get down to the business of extracting the biggest added value from every last Euro that has been decided. Through the European Structural and Investment Funds; through Horizon2020; through Erasmus+; through the Youth Employment facility, the European budget focuses on jobs and growth, and it is the main source of investment funds for many of our Member States. This budget is indeed a very tangible expression of European solidarity at work.

So, I think this is important also from the European Parliament perspective. We all know that in many of our Member States now, people associate Europe with austerity. I think through the European budget, through the very important funds invested by Europe in our region, we can associate Europe with, and say Europe is, solidarity. Because in fact, the European Union is providing very important resources to the regions that need the most to achieve territorial, economic and social cohesion.

The responsibility to deliver reforms and to make most of available funds lies now with the Member States themselves. But we all here have a responsibility to explain to Europe citizens the reason for the reforms. And also to listen to them about the effects of those reforms.

Let me conclude, Honourable Members,

We should take heart from what we have achieved so far, remembering where we are now and where we were five years ago; and also thinking about what could have been the alternatives.

Together, we are emerging from the crisis united, open, and I believe stronger. Stronger because we are now preparing a new basis for competitiveness of Europe; because we are now taking all the lessons from the globalised word and what it means to be ready to confront our partners in this much more competitive world.

But there is still much more to do under the European Semester and Europe 2020 strategy.

And for those who question our approach, who question whether the European Union is part of the solution, I believe that all of us who care about Europe should welcome and engage in that debate.

Because Europe needs that political debate.

Because I believe a huge consensus will move us towards greater convergence, solidarity and cohesion. We are stronger together and it is together that we can better achieve our common aim: growth and jobs for Europe.

Mr President, Honourable Members,

I look forward to listening to the debate. I thank you for your attention.

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